Understanding FREOPP’s Obamacare Replacement in 10 Minutes or Less

The second edition of FREOPP’s health reform plan, Transcending Obamacare, is 102 pages cover-to-cover. If you want to read the whole thing, or if you’re interested in the plan’s take on the broad range of health reform topics, click here. The article you’re reading now is for those who specifically want a quick read on Transcending Obamacare’s approach to replacing the Affordable Care Act.

The text below is divided into four sections:

• First: things that both Obamacare and Transcending Obamacare do;
• Second: things that Obamacare does but Transcending Obamacare doesn’t;
• Third: things that Transcending Obamacare does but Obamacare doesn’t;
• Fourth: things that distinguish Transcending Obamacare from plans that congressional Republicans have proposed.

Things that both Obamacare and Transcending Obamacare do

1. Expand the number of people with health insurance. The principal objective of the Affordable Care Act is to expand the number of Americans with health insurance. The ACA has fallen well short of expectations at meeting that goal, and has often done so with high-cost plans with poor access to physicians. Transcending Obamacare’s Universal Tax Credit Plan also covers the uninsured; indeed, we estimate that Transcending Obamacare will cover 12 million more people than the ACA by 2025.
2. Cover those with pre-existing conditions. Advocates of the ACA repeatedly point to the fact that it covers people with pre-existing conditions, because this feature of the law is politically popular, even though the problem of people being denied coverage due to a pre-existing condition is exceedingly rare. Transcending Obamacare also includes “guaranteed issue,” the same tool the ACA uses to cover those with pre-existing conditions.

Things that Obamacare does that Transcending Obamacare doesn’t

1. Induce rate shock. The ACA introduces an entirely new layer of federal regulations into the individual health insurance market: tens of thousands of pages of onerous requirements that drive up the cost of health coverage. Transcending Obamacare is carefully designed to cover the uninsured without drastic premium hikes.
2. Force people to buy health insurance. Infamously, the ACA contains an individual mandate, imposing financial penalties on those who would prefer not to buy Obamacare’s costly coverage. Transcending Obamacare has no such mandate, and uses other well-validated tools, like longer insurance contracts, waiting periods, late enrollment fees, and auto-enrollment, to ensure that enrollees don’t game the system.
3. Expand low-quality, government-run health insurance. The ACA covers the uninsured mostly by dramatically expanding Medicaid, a dysfunctional 1960s-era program that delivers no better health outcomes than its enrollees would have with no insurance at all. Transcending Obamacare replaces the ACA Medicaid expansion by offering the same population refundable tax credits that they can deposit in health savings accounts and use to purchase high-quality private coverage.
4. Expand the federal role in the health care system. The ACA substantially increases the already large role of the federal government in the U.S. health care system. Transcending Obamacare puts patients in charge of the health care dollars that are now spent on their behalf by the government. Over three decades, it reduces federal spending by $10.5 trillion and federal taxes by $2.5 trillion, while making the Medicare Trust Fund permanently solvent and covering more people than Obamacare.

Things that Transcending Obamacare does that Obamacare doesn’t do

1. Expand choice for health coverage and care. Obamacare’s plethora of federal regulations have dramatically restricted the kinds of coverage that individuals who shop for coverage on their own can buy. Transcending Obamacare goes in the other direction, restoring states’ traditional role in regulating the insurance markets in their jurisdictions, and expanding access to health savings accounts that can be used to obtain care from any health care provider.
2. Reduce premiums relative to current law. The ACA has doubled individual-market premiums relative to where they were before Obamacare went into effect. Transcending Obamacare reduces premiums by restoring choice and competition to the health insurance market, and by tackling other drivers of high-cost health care, such as hospital consolidation.
3. Improve health outcomes for the poor. By replacing the ACA’s Medicaid expansion with high-quality private coverage and health savings accounts, Transcending Obamacare gives lower-income Americans significantly greater access to physician care than they have under Obamacare. We estimate that Transcending Obamacare’s Universal Tax Credit Plan would nearly double access to physicians and hospitals for the Medicaid population, and would achieve for Medicaid enrollees a 159 percent improvement in the Medical Productivity Index, a proxy for health outcomes developed by the University of Minnesota.

Differences between Transcending Obamacare and GOP replace plans

1. Designed to attract 60 votes in the Senate. While bipartisan health reform is far easier said than done, Transcending Obamacare was designed from the ground up to overcome a filibuster and attract bipartisan support, by appealing to traditional Democratic priorities (coverage expansion and improved health care for the poor) and traditional Republican priorities (limited government in the form of less spending, lower taxes, and fewer regulations). Most plans proposed by congressional Republicans, particularly those from the House of Representatives, are significantly less likely to attract support from Democrats, because they will be scored by the Congressional Budget Office as covering significantly fewer people than Obamacare.
2. Replaces Obamacare without disrupting coverage for the newly insured. If you want to cover people with pre-existing conditions, without an individual mandate forcing others to buy coverage, your reforms of the individual insurance market have to be crafted with care. As of 2016, the most widely discussed GOP plans don’t do enough to ensure people stay in the market without an individual mandate. Private health insurers, who will be tasked with offering coverage to the uninsured under Republican reform, are very concerned about this problem. Popular Republican proposals, like high risk pools, cause as many problems as they solve. All of the GOP plans proposed thus far are likely to be scored by the Congressional Budget Office as covering far fewer people than the ACA.
3. Deploys means-tested tax credits. Nearly all Republican plans offer refundable tax credits to the uninsured to purchase health coverage, as does Transcending Obamacare and the ACA itself. Where Republicans are split is on the subject of means-testing. House Speaker Paul Ryan’s plan, for example, offers a uniform tax credit that doesn’t vary by income. The problem with that approach is that in order to give every American a tax credit, the tax credit has to be much lower than the ACA’s, making it hard for the poor to afford coverage. The ACA and Transcending Obamacare both use a means-tested tax credit to avoid this problem. The most prominent Senate GOP replace plan, co-authored by Sen. Orrin Hatch (Utah), Sen. Richard Burr (N.C.), former Sen. Tom Coburn (Okla.), and retiring Rep. Fred Upton (Mich.), also deploys means-tested tax credits, for the same reasons. Rep. Tom Price (Ga.), Donald Trump’s pick for HHS Secretary, proposed a means-tested tax credit in his original replace plan, but moved to a flat credit in the latest version.

Transcending Obamacare 2.pdf

FREOPP’s patien

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Further reading

• Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency. (FREOPP.org)
• Why Obamacare plans are so expensive, and why fewer people than expected are signing up for coverage. (FREOPP.org)
• Avik Roy talks to the Pacific Standard about the right way to replace Obamacare. (FREOPP.org)
• Some conservatives are complaining about the GOP’s “repeal and delay” strategy, but it’s the only viable option they have. (Forbes)
• Republicans will fail to replace Obamacare, unless they carefully craft their repeal bill. (Forbes)
• Donald Trump is right: you can repeal Obamacare and still cover everyone with pre-existing conditions. (Forbes)
• The GOP’s favorite idea for dealing with pre-existing conditions, high risk pools, could have many unintended consequences. Preserving guaranteed issue is simpler. (Forbes)
• Non-means-tested tax credits, a common GOP idea, would disrupt coverage for millions of Americans. (Forbes)
• A detailed look at Paul Ryan’s plan to replace Obamacare and reform health care. (Forbes)
• Tom Price’s replace plan emphasizes health savings accounts, and defends the prerogatives of physicians. (Forbes)
• The best GOP replace plan so far is the Patient CARE Act, proposed by Hatch, Burr, Coburn, and Upton. (Forbes)